You’ve already answered one important but difficult question: do you need life insurance for your children? Now, it’s time to decide how much. The decision will depend on your goals, how much you’re comfortable paying, and how much coverage you want.
How much life insurance do you need for children?
At the minimum, you want enough life insurance for your child to pay for funeral expenses. The average cost of a burial is around $8,000 (around $7,000 for cremation), so aim for a minimum of $8,000 in coverage. Note that this minimum coverage goal above does not account for any medical expenses, and it likely does not provide any future financial benefits.
Covering funeral and medical expenses
In addition to funeral expenses, you may need to pay for medical care your child receives. On average, parents pay around $1,300 out-of-pocket for pediatric hospitalizations. For some families (around 14%), hospital bills exceed $3,000.
If you are purchasing life insurance to cover your children’s’ final expenses, then the coverage that a rider provides may be sufficient. A life insurance rider adds coverage for a child to the parent or guardian’s existing plan. This option is usually the least expensive, and a rider can be converted into a permanent policy for your child in the future.
However, after the loss of a child, you’ll likely need time off work. Unless you have an unusual amount of vacation or sick time, you may require some extra cash to cover the bills while you grieve. A stand-alone policy with a higher benefit amount may be more ideal since it could help pay for funeral expenses and a few months off the job. A higher benefit amount also means a higher monthly cost (premium).
Future insurability
If you are more concerned with making sure your child can benefit from a life insurance plan into their adulthood, consider getting a permanent, stand-alone policy when they are young and healthy. Rather than a life insurance rider or term plan (which sets terms of coverage that will end), consider a universal or whole life insurance plan.
Universal and whole life insurance plans may cost more, especially when paying for a plan for 18 years, but they will help ensure that your child is locked in on premiums, insurability, and plan benefits. You don’t need the highest benefits amounts to help future insurability; just make sure you stay up to date on your premium payments.
Making an investment for the future
If your goal is to gift this policy to your child when he or she is an adult, then you may want to take the highest amount of coverage you can get through a plan that has savings and growth components. These are usually available with universal and whole life insurance policies. The highest amount of coverage, and highest growth opportunities, mean the highest premiums. If you can afford to maintain these plans until your children are ready to take over the premiums, it’s a great gift for your children’s financial future.
HealthMarkets Can Help
If you need help deciding the coverage type or amount to purchase for a child, let HealthMarkets assist you. A licensed insurance agent can help you decide how much life insurance makes sense for your children. Call (800) 827-9990 today to get a quote at no cost to you.
FAQs
To give your child a healthy amount of financial security, you might consider $25,000 to $50,000 in coverage – a nice leg up on the future. The more coverage you buy, the bigger the policy's cash value can become.
What is a good amount of life insurance for a child? ›
How much life insurance do you need for children? At the minimum, you want enough life insurance for your child to pay for funeral expenses. The average cost of a burial is around $8,000 (around $7,000 for cremation), so aim for a minimum of $8,000 in coverage.
Why buy whole life insurance for a child? ›
A whole life policy is a valuable gift for a child because it locks in low premiums for a lifetime, guarantees the child's insurability, and builds cash value. Term life does none of this.
Does Dave Ramsey recommend life insurance for children? ›
Dave Ramsey does not recommend purchasing life insurance on children, specifically Gerber Life and similar policies that pose as college savings plans or promise a child's insurability into the future.
What happens to a child's life insurance policy when they turn 18? ›
In most cases, the life insurance policy purchased for a child doesn't automatically become their asset when they reach adulthood. While some companies have products that transfer ownership to the child at age 21, the majority keep the ownership with the parent or grandparent.
Why is it unwise to buy life insurance for a child? ›
There is a downside to procuring life insurance for a child, including: Long-term commitment. When you buy a whole life insurance policy for a young child, you can expect to pay premiums for many years. If money gets tight and you miss a payment or cancel the policy, you'll have paid all that money for nothing.
Should I put my kids as beneficiaries on life insurance? ›
Due to legal restrictions, minors can't be paid the death benefitDeath benefitThe amount of money the life insurance company will pay your beneficiaries when you die directly, so it's better to stick with an adult beneficiary or set up a trust for your child.
What age is best to buy whole life insurance? ›
In accordance with the “get a life insurance policy while you're young and healthy,” mentality, the 20's would be the ideal age. Many young people think that they don't need a life insurance policy, and it's not difficult to see why.
At what age should you stop buying life insurance? ›
At What Age Is Life Insurance No Longer Needed? Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they have retired, their kids have grown up, and they've paid off their mortgage and other debts.
Is it normal for parents to have life insurance on a child? ›
However, many parents and guardians also purchase life insurance for their children to provide them with coverage and financial support later in life. Purchasing a whole life or term life policy with a conversion rider is ideal if you intend to transfer the policy to your child once they're old enough.
Suze Orman is a big supporter of term life insurance policies, and she firmly believes that those types of policies are the best ones to have. She insists that term life insurance policies are cheaper than whole and/or universal life insurance policies and that they just make sound financial sense.
Is life insurance worth it with no kids? ›
The bottom line. Life insurance makes sense if you have children, but even if you don't, it could be a valuable way to protect yourself and your loved ones from future financial hardship.
What is Dave Ramsey's advice on buying life insurance? ›
Core Ramsey Teaching: You only need life insurance while you have people depending on your income. Buy a 10–20-year term policy worth 10–12 times your annual income. Since life insurance is only for the short-term, you should only buy term life insurance. (Hence the name.)
How much life insurance should I get for my child? ›
To give your child a healthy amount of financial security, you might consider $25,000 to $50,000 in coverage – a nice leg up on the future. The more coverage you buy, the bigger the policy's cash value can become.
Is dependent life insurance worth it? ›
Dependent life insurance can be a helpful workplace benefit. If a loved one passes away, it can allow you to grieve and reduce financial strain. These can be a great choice if your employer offers them but may not offer enough coverage on their own.
Do I need life insurance if my kids are grown? ›
Now that they're grown, and you may be left wondering whether you still need life insurance. Don't be too quick to abandon your policy. Although everyone's situation is different, there are many reasons to hang onto life insurance coverage even after the kids have moved out.
What is a decent amount of life insurance? ›
Life insurance experts suggest having enough coverage to replace at least 10 years of your salary. 2 In this case that would be $400,000. You could also add some extra as a buffer for inflation and other unexpected costs. For this example, then, a $500,000 policy might be reasonable.
How much is life insurance for a healthy 20 year old? ›
Whole life insurance rates for nonsmokers
| Age | Average annual rates for men | Average annual rates for women |
|---|
| 20 | $3,593 | $3,173 |
| 30 | $4,940 | $4,407 |
| 40 | $7,440 | $6,512 |
| 50 | $10,353 | $9,002 |
3 more rowsAug 28, 2024
30 to 60 years old
Whole life or universal life policies, if you can afford permanent coverage, can provide more financial security for your loved ones. But if you have a lot of debt, you may opt for a high-value term life insurance policy until the debt is paid down.
